Wednesday, June 20, 2012

Goldman Sachs Investment Report

Summary:

Goldman is trading for the cheapest price in its history as
a public company. Goldman is a great business that dominates just about every
business segment they are in. Goldman has been hit from every angle recently.
Some of the challenging factors include subpar loan demand, low M&A, IPO
and other investment banking business, regulatory threats, market deleveraging,
lower company leverage, constant criticism etc. This has resulted in one of the
world’s premier investment banks trading at less than 75% of tangible book.
Goldman is worth over $200 per share and investors are ignoring many positive
factors going forward. Over the course of Goldman’s history they have been very
nimble in shifting assets to the highest ROI areas, assuming that ROE will be
at these very depressed levels forever is not an accurate conclusion. Goldman
is trading at a large discount to the liquidating value of its assets that are
nearly all mark to market. Investors are ignoring the opportunities and tailwinds
that exist. There is a huge potential to grow significantly overseas and
competition has been reduced from the financial crisis. In addition, the
reduction of the firm’s temporary liquidity will add a few billion to the
bottom line. Increased leverage and a return to more risk taking will also
boost results. Large share buybacks at
such an advantageous price will further enhance value. Goldman is a low
downside bet that could be worth up to $270 in a few years or 3x the current
price.